Fed Expected to Hold Rates in October Then Hike to 4.00%-4.25% by Year-End

A Reuters poll of 100 economists shows near-unanimous agreement that the Federal Reserve will hold the federal funds rate steady at 3.75%-4.00% at its October 27-28 meeting, with 94 of 100 respondents expecting no change. The same poll reveals a sharp shift in the outlook for December: 94 economists now expect the Fed to hike to 4.00%-4.25% by year-end 2026, up dramatically from just 29 of 76 economists who held that view in September.

Market conditions heading into the week reflect the pressure from elevated rates. The 10-year Treasury yield is hovering near 5.10%, and equity futures are mixed, with the Nasdaq 100 leading gains of around 1.3% on AI-driven dip-buying ahead of major earnings from Meta, Tesla, and Netflix, while Dow futures are marginally lower. Oil is softer, with WTI down roughly 1% and Brent off 1.3%.

Canadian markets are feeling additional strain. Canadian bond yields fell as investors assessed the rate outlook following the release of Canada's CPI data, while Canadian equities are set to open lower amid concerns over high inflation, weak precious metals prices, and ongoing geopolitical tensions in the Middle East and parts of Europe. CoreWeave shares dropped 4.6% in premarket trading, with its bond market difficulties cited as a signal that the Fed should remain cautious about further tightening.